We now live in a world that is very different from even 5 years ago. To succeed in the ever evolving Networked Society, we must understand the fundamental changes that are taking place, adapt business models and leverage new technology capability. This paper offers insights, impacts & frameworks to understand this change & gain competitive advantage.

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Changing the Game Before the Game Changes You

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ericsson discussion paperGeoff Hollingworth, Ericsson North America,Ericsson Evangelist, in collaboration withJason Hoffman, Founder and CTO JoyentChanging the GameBefore the GameChanges YouMore will change in the next 10 years than in the previous 100. This paperdescribes the foundational changes and attempts to explain how we canmanage them to our advantage1.1 The paper references various online thought leadership articles and visuals and links to the original material whereverpossible. Please contact the author if any of these references need updating or removing. We hope we increase visibilityfor all.

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IntroductionThis paper attempts to place the massive business changes we are currently experiencing intoa simple and understandable framework, that allows us to feel more comfortable with the future.The paper does this by presenting a series of insights and impacts.Today large industry leaders are power of a human brain by 2025. industries is being disrupted.being challenged, seemingly over- By 2045 it will have the equivalent This paper articulates a series ofnight, powerless to control their computing power of the total hu- insights and impacts that we be-own destiny despite their legacy, man population. It sounds like sci- lieve will drive a future state ofstrength and footprint. Change is ence fiction but the world we live in change, a future state of real timehappening at an exponential rate today looks like the science fiction collaboration and connectivity be-and humans are not naturally engi- of the 1960’s. tween human and machine, whereneered to cope with such exponen- frictionless interaction and scalabil-tial rates of change. Before the This means the impact of technical ity shall deliver a re-engineering ofIndustrial Revolution, technological revolution starts to enter the im- how we live, work and play.change over a normal human life mediate business planning cycles.span of about 40 years was almost There is a need to embrace the Ericsson also acknowledges thatnonexistent. We now live in a world fantastic as part of the immediate all said in this paper applies equallythat is very different from even just future. Those who do will find com- to Ericsson and telecom.five years ago. petitive advantage. Those who do Ericsson must also embrace the not will be challenged to maintain same future challenges as others.Ray Kurzweil [ref]2 predicts we their status quo.will witness approximately 20,000 We hope you find it enlighteningyears of technological advance There are opposing views. Technol- and appreciate any feedback atin the next 100 (when measured ogy progress will slow. Impacts will http://facebook.com/ericssonby the rate of progress in the year not be as dramatic as predicted.2000). Or to put another way, we All future statements have to be Presentations of the material canwill see more change in the next observed in a balanced and rea- be made on request.10 years than we have seen in the sonable manner.previous 100. However it appears we are on an 2 Kurzweil is a well known inventor who has receivedAs the chart shows a $1000 com- accelerating journey where the 17 honorary doctorate degrees, awarded to him by various universities, acknowledging his extraordinaryputer will have the computational status of business today in all accomplishments. Exponential Growth of Computing “We will see more 1060 1055 change in the next Calculations per Second per $1,000 10 years than we 1050 1045 1040 1035 1030 have seen in the 1025 1020 All Human Brains previous 100” 1015 One Human Brain 1010 One Mouse Brain One Insect Brain 105 1 10-5 10-10 1900 1920 1940 1960 1980 2000 2020 2040 2060 2080 2010 Year Changing the Game Before the Game Changes You 3

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Insight:“Device to Power”A birthday card that sings “Happy Birthday” to you the less power they use and the longer the battery lastshas more computer power than all the Allied Forces of [ref].1945. The card (and chip) is commonly thrown away.Your cell phone today has more computer power than Note the devices we have today are the least powerfulNASA had back in 1969 when it landed two astronauts devices we shall ever carry. They are the equivalent ofon the moon. Video games, which consume enormous Ford Model T’s when compared to today’s cars.amounts of computer power to simulate 3D situations,use more computer power than main frame computers As power increases and price decreases the followingof the previous decade. The Sony Playstation of today, effects will be seen:which costs $300, has the power of a military super-computer of 1997, which cost millions of dollars [ref]. • More powerful device applications • Greater ubiquity of devices everywhereAs the chart shows, device CPUs have advanced from • Devices that are in reality disposableabout 58 KHz as of 2000 to about 1.5GHz in a littleover a decade. Each enhancement of device capabili-ties begets a high-powered expansion of apps andapps complexity. There is now a desktop computer inyour pocket. In a few short years it will be the equiva-lent of a super computer. Processors have moved fromsingle core to dual core to now quad core planned tobe mainstream in 2013. The continuous play between “… NASA launched a man to thecompute power and battery life shall continue causinginnovation to drive superior performance. Transistor moon. We launch a birdsize continues to decrease where silicon production into pigs”processes are moving from the 28nm standard of todayto 20 nm and even 14nm. The smaller the transistors, [ref]Figure 1 - Heavy Reading4 Changing the Game Before the Game Changes You

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Insight: “IndustrialScale Compute”In parallel to the changes seen on the device side,there is a revolution happening in IT on the serverside. Commonly referred to as cloud computing it “ It took AOL 9 years to hit 1 millionis now possible to “rent” vast amounts of computercapacity and/or software services on demand, users. It took Facebook 9 months.and only pay for what is used – at greatly reduced It took Draw Something~9 days”cost and lead time compared with traditional ITdeployments. This has completely changed theeconomic landscape and removed barriers to entryfor anybody wishing to bring a service to market.It has also created a whole new industry of cloud The net combined effect of all these is drastically lowerinfrastructure providers. Traditionally any company production costs of compute capabilities combinedwould have needed to buy hardware, install software, with time to market. Two backend engineers can nowand find somewhere to run it then employ people to scale a system to support over 30 million active usersmanage it. Enough hardware and software would have [ref].had to have been bought to cope with a peak trafficlevel, irrespective of how often this traffic level was This allows a service mania environment where veryexperienced (the classic online retail dilemma for Black few people can deliver many services very quickly andFriday). Now “cloud service providers” remove that very cheaply, that can scale in terms of users and us-burden from the software developer’s realm. age faster than ever seen before. People can now let the market decide success on a scale that was notThe three disruptive effects of cloud computing are: possible to consider even 10 years ago. It took AOL 9• Removal of the need to install and operate comput- years to hit 1 million users. It took Facebook 9 months.ing equipment, support software and hosting facilities, It took Draw Something~9 days [ref].requiring less people, saving money and acceleratingtime to market (one person can now manage upwards By 2011 “the industry had reached a point whereof 10,000 servers) it was realistic to form a start-up and launch an internet tech based product for less money and in• Only pay for what you use, very low up front invest- less time than it would have taken to simply launchments required the website for such a company in 1997” [ref].• Scale (up and down) as slowly and/or quickly as your It is the very early days of cloud computing.market dictates, the only worry left being a business Looking forward, never again will cloud computingplan that makes sense for the service provided (avoid- capability be this hard to use, expensive or slowing the Priceline “Internet bubble” scenario, where despite its already disruptive attributes in thesethe more customers they created, the faster they lost spaces.money…) Changing the Game Before the Game Changes You 5

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Insight: “InformationExplosion”In the next 48 hours more data will be created than New skill sets that can manage and analyze suchpreviously in the past 30,000 years [ref]. Users are now data shall be required inside the corporate structuresuploading 72 hours of video every minute to YouTube, of tomorrow. As Google’s Chief Economist Halcompared to 48 hours just a year ago [ref]. In the Varian is quoted saying “the sexy job in the next 105 seconds it has taken you to read the above 3 sen- years will be statisticians” [ref].tences, an additional 6 hours have been stored. Big data is only just beginning. Looking forward,A scarcity of data has been replaced with an over- never again will big data be this hard to understand,whelming abundance. However, the data is only instrument or put into operation.valuable if interpretations can be gathered from it in atimely fashion and if the generated interpretations arepossible to use in the ongoing business process. This isa reversal of previous generation’s problems where in-sights had to be extrapolated from a limited set of data.Insight - “Information Explosion” Peter Sondergard,Head of Global Research, said “Information will be theOil of the 21st Century. It will be the resource runningour economy in ways not possible in the past” [ref].Anticipatory businesses will be able to adapt theirbusiness operations in “as close to real time” aspossible, to maximize their customer understandingand best position their core business value proposi-tion towards them. Customers are more empoweredfrom their access to information and big data providedby other businesses and service providers. It will beimpossible to survive in the future without integratingthe wealth of global knowledge into everyday businesspractice and procedures.Insight:“De-Materialization”The world is being transformed from a physical repre- 2. A digital product re-defines the base productsentation to a digital representation. This is the insight through a new wave of innovation. Removal of thewe all see around us, yet seems to be the most invis- physical limitations of the material the product wasible to the naked eye. When it happens the effects being distributed upon enables a new round of producttend to change industries and the leaders inside them, regeneration and discovery.unless the leaders dematerialize first. There are threemassive implications when digital representation of 3. Speculative production is removed thus producingphysical product happens: the ultimate efficiency of supply versus demand, reduc- ing waste and saving the planet’s resources.1. Ability to deliver on demand anywhere moves intoreal time. A digital product can be delivered immedi- Our challenge is to understand what we no longer evenately when requested. think about. Before the Industrial Revolution, produc- tion was local and everything was tailored to individual6 Changing the Game Before the Game Changes You

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orders. There was no concept of common size since tory Mentality”). Many companies likely feel safe fromthere was no concept of mass production. With the the disruption of digitization, especially those involvedadvent of steam and industrial capacity the world in the manufacturing of physical parts. The advice toentered a phase of mass production. Normalization these companies is to research the latest in 3D printingaround sizes, shipping of products based on anticipat- and re-visit those assumptions [ref].ed demand became the normal mode of operation thathas been constant for the last 200 years. Our wholesociety, education and even organizational structurehave been optimized to maximize the potential successof any company operating in the status quo. This is no “De-materialization forces compa-longer true. The transformation from physical to digital nies (who want to survive) to re-visitcompletely disrupts the traditional constructs of massproduction and replaces it with mass customization, we their true core business is ratheronce again live in a market of one, and the only differ- than focusing on what they physi-ence being each market of one can be delivered to withscale and efficiency. The compromises of the industrial cally deliver.”revolution no longer apply.Of all of the insights so far listed, this is the mostdisruptive and the most important for all companiesto understand. The largest mistake a company couldcurrently make is to consider their product not possibleto digitize and thus could not be disrupted. The secondlargest mistake would be for a company to understandtheir product could be digitized but fail to change be-cause of misunderstanding their true core business,confusing it with profit pools that had appeared dueto the required physical requirements of delivery fromthe earlier phase (see chapter “Impact: End of the Fac-Insight:“Ubiquitous Network”The end result of all insights to this point is a height- unauthorized persons have had access during theened dependency of society, business and individuals journey. This is fundamental to people, businesseson a fully functioning real time connectivity fabric. and society as more dependency is placed on theWhat makes cloud truly transformative is mobile; the digital eco-system.ability for any cloud based service using any device tobe connected anywhere at any time. For example, the upside to the connected car is a bet- ter experience for the owner while giving an opportu-The networks of the future shall focus on perfor- nity to transform the life time value of the car ownershipmance based execution of digital asset shipping from the perspective of the car manufacturer and thewhen the integrity, reliability, security and transpar- car dealer. However, there needs to be guarantees thatency (real time introspection) of operation guarantees cars cannot be “hacked”, insurance details cannot bewhen something is shipped it gets there when it is modified in transit, performance is as specified and thesuppose to, it is the same as when it started and no operation is guaranteed to function. Changing the Game Before the Game Changes You 7

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The digital transformation is very similar to an earlierjourney that happened in the physical shipping indus-try, that led to the transformation of the physical globalsupply chain. Before 1954 the global shipping industrywas an ad-hoc orchestration where the cost and relia-bility of shipping was best effort. In 1954 the revolutionof the shipping container began. Transport executiveMalcolm McLean had watched teams of dock workersunloading goods from trucks and transferring them toships and came up with a more efficient way of doingthings. The new era of the shipping industry and theshipping container was born.McLean’s true innovation was to understand the corebusiness of the shipping industry was not operatingships but delivering cargo and delivering cargo withthe best performance possible. Before the containercame along a typical ship might spend a week tied upat dock. “A typical cargo ship in the 1950s might have200,000 individual items to be loaded. It was a hugelylabor intensive business and hugely costly. What thecontainer did was get rid of all that” [ref].Loading loose cargo onto an average ship in 1956 cost$5.86 per US ton. Container ports could load vesselsfor just under 16 cents per US ton. Ultimately “It costsless to ship a container between China and Felixstowe(England) than it does to then send it on the road toScotland” [ref].But more efficient use of shipping assets was not theonly change the shipping container initiated. It becamepossible to start to guarantee delivery times. In digitalterms this is the same as latency. Since the contain-ers are secure, the items inside were guaranteed to besecure (digital equivalent – data security) and also thecontents of the container were guaranteed to be the “McLean’s true innovation was tosame as when the journey started (physical equivalentof data integrity). This changed what products could understand the core business of thebe shipped and delivered globally, opening up com- shipping industry was not operatingpletely different global markets. Containers could startto be monitored and thus the contents inside could be ships but delivering cargo and de-tracked in real time to monitor delivery and give trans- livering cargo with the best perfor-parency to the product owners. mance possible.”The advent of the shipping container also initiatedchanges required at the port to re-engineer the on-loading and off-loading of containers through craneinfrastructure (a complementary business where breakeven business models drive the market efficiency of thecore business of performance based cargo delivery –see “Insight: Economics of the Future”).8 Changing the Game Before the Game Changes You

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Impact: End of theFactory MentalityLarge leaders of industries are being challenged as 70% of today’s cost structure lies in paper, printing,the physical fulfillment model of the last 200+ years distribution. This can all be saved. A revenue stream isis replaced with its digital children. Kodak is one such required, however.example. In 1976, Kodak commanded 90% of filmsales and 85% of camera sales in the U.S and at its For the music industry the same is already true for CDs.peak Kodak had a market capitalization of 31 billion For the film industry the same is true for DVD’s.USD (1997) [ref]. It also invented the world’s first digitalcamera in 1975, the invention that would lead to its The key lesson for all to understand isultimate demise. the difference and dependencies between core business and physicalKodak filed for bankruptcy in 2012 with a market production.value of only 145 million USD [ref]. It failed to Impact– “where did my business go?” remember its corebusiness of enabling mass market photography. It hadreplaced its reason to be with the delivery mechanism “Physical realization of the coreit had created to deliver on the promise – that of film.Physical realization of the core business promise will business promise will not survive thenot survive in the transformation of physical and digital, transformation of physical and digi-and companies that cannot disconnect their futurefrom their physical representation of the past will fail. tal, and companies that cannot dis- connect their future from their physi-The story is true for newspapers. Their core businessis journalism. The question is how to monetize such cal representation of past will fail”reporting, not to protect a paper printed representation.Impact:“New Businesses”Some companies seem to be doing very well. Account- tries and companies. Through this paper we will showing for now more than $960 billion in market capitali- the most important differentiator is to understand corezation, the Four Horsemen of Mobility have divided business and then to understand how the core busi-into three groups: Amazon and Google are all making ness can move into the next generation of competitionbillions each year from mobile devices, Facebook is still by leveraging new technology.trying to figure out how to get there, and Apple is mak-ing more money from mobility than all three combined[ref].These companies are all executing with growth be-cause they understand where their core business liesand what adjacencies (or complements) their core busi-ness growth depends upon.Apple sells premium hardware platforms. Google sellsadvertising. Amazon’s core business is retail. Face-book’s core business is their social graph. These com-panies are all examples of companies that, of course,are closely associated with the digital age (yet youcould argue Apple is a legacy PC provider). However,later we will give other examples of traditional indus- Changing the Game Before the Game Changes You 9

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Insight: “Economicsof the Future”Two economic laws exist, the “economics of comple- application store as a complement to increase thements” and the “economics of network effects”. Both value of their hardware platform experience. Amazonexisted previously but in the world of the very low fric- prices the Kindle at a loss to drive their core retail busi-tion digital society, they increase in importance. ness in the future. Facebook (still the most challenged from a real business point of view, despite alreadyUnderstanding core business enables the economic exceeding Amazon’s revenues) publishes its social net-law of complements, which accelerates rapid market work via API’s to drive the reach and insights they canadoption. The law of complements explains why generate from their social graph.some companies may give away services that othercompanies use to drive direct revenues. This is very Understanding core business enables a companyclearly seen in the space of new communication servic- to understand its business complements, and placees where some companies are giving away voice and into execution a total strategy with awareness of whatvideo communications for free (Google) while others needs to be core and closed and what needs to beare charging their customers in very traditional models complementary and “open.”for very high margins (carriers). This clearly is creatingtension in the marketplace. Network effect states the more people taking part in a network the exponential increase in the value of thatThe simple understanding of the law of complements network. The traditional model for network effect wasstates a good’s demand is increased when the price of the telephone system where more people who haveanother good is decreased. Conversely, the demand for telephones increase the value for everybody who hasa good is decreased when the price of another good is a telephone. This is a one sided network effect. Theincreased [ref]. current network effects are two sided and driven by software platforms (Microsoft, Apple, Google, amongA simple example of a complement is that of the rela- others). The more people using a platform, the moretionship between the car and fuel (or gas). The Hummer attractive it is for a developer to develop their applica-car was tremendously popular when gas in the USA tions for that platform. The more applications that existwas under $1 a gallon. When the cost of gas stayed on a platform, the more valuable it is to the peopleabove $3 a gallon for a long time, the Hummer car using the platform.stopped being manufactured. They were exposed to acomplement that was beyond their control.Successful companies will clearly understand their corebusiness and thus clearly understand their comple-mentary businesses. Google’s core business is adver- “Successful companies will clearlytising. Everything they do is to drive revenue to theircore business. What will make customers spend more understand their core businesstime with their inventory, how will they maximize the and thus clearly understand theirrelevance of their inventory. This is why they are givingAndroid away, to ensure an “openness” of mobile, they complementary businesses”are giving away communication services so peoplespend more time on their properties. Apple runs theirQX QX Py Py Time Time10 Changing the Game Before the Game Changes You

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Insight: “TraditionalBusinesses CanTransform”Many industries are undergoing transformation. One to build their pricing based on the actual, real-timeexample is the insurance industry, specifically vehicle behavior of drivers, PAYD redefines entirely the wayinsurance. to charge for motor risks. Underwriters must adapt to the new connected way of doing business.”The core business of insurance is the managementof risk. The traditional way (and the only way to manage After Italy, the wave is now reaching the UK and therisk in the past) has been statistical analysis of previous US, where Moody’s recommended underwriters “adoptbehaviors to manage financial coverage of behavior in it sooner than later”. We expect all developed countriesthe future. If the statistical calculation of risk exposure to embrace the new model, with local technology- andis wrong then the results are financial failure for those business variants” [ref].issuing the coverage [ref]. Insuring the drivers of vehicles will never be the sameThe new market offering of usage based insurance has again.changed this paradigm. For the first time insurancecan be issued based on monitoring real time (driving) This is one example of an industry under businessbehaviors through connected cars. process transformation where the competitive landscape has changed due to the adoption of theThe Pay as You Drive (PAYD) market already has over next era of capability and growth.2 million customers and has reached a tipping point.The expectation is that the market will be multiplied by Other industries such as healthcare (“Why do I need to50 by the end of the decade. Telematic-enabled policies be in hospital to be monitored? Why do I need acutewill then generate €50 billion in premiums to insurers symptoms before treatment starts?”), energy, retail, etc.who have seized the opportunity. will follow. All aspects of society, business and people will transform. Companies have to choose whether toThis is good news for consumers worldwide. Low lead the process of transformation or to follow the leadmileage and safe drivers will stop subsidizing fraud- of transformation started by competitors. Our recom-sters, road warriors and dangerous drivers, translating mendation to all companies is to lead the transforma-savings to them of up to 50% on their car insurance tion process.premiums.Frederic Bruneteau, Managing Director, describesthe impact for insurers:“Everybody has a plan until they get punched in theface”, famously said Mike Tyson. Well, this is whatcould happen to numerous motor insurers if theydo not reshape their strategy swiftly. The Internetis revolutionizing all sectors and this is now the turnof the auto insurance industry. By enabling insurers “The core business of insurance is the management of risk” Changing the Game Before the Game Changes You 11

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Conclusion:A Real Time WorldThe parallels between the physical shipping industryand the digital shipping industry are clear to see. Thepaths of the connectivity cables in the world of today “The paths of the connectivityhave the same deployment patterns as the traditionalglobal trade routes. The second part of this paper cables in the world of today havedescribes the core business model opportunities for the same deployment patterns asthis space, the required operational capabilities and thecomplementary businesses that will drive the growth. the traditional global trade routes”The promise of the Networked Society depends on theperformance based operational delivery of the underly-ing network. As seen with the revolution of the physicalglobalization revolution, the same shall be seen in thedigital space going forward.12 Changing the Game Before the Game Changes You

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What Does itAll Mean?The world is changing and the speed of change is A performance driven delivery shall be the match ofaccelerating. There will be a transformation from delivery + security + integrity + transparency toindustrial revolution led behaviors to information led business need and price point.behaviors. This will change individuals, businessesand society overall. In the business world changes The most successful businesses of the future shall beare already visible as can be seen from new disruptive the ones that execute with the greatest clarity on thecompanies (Google, Amazon, Facebook) as well as tra- above and can make the best data driven decisions asditional companies and industries re-discovering their close to real time as possible.core business (insurance, Xerox [ref]). We call this end state the Networked Society.Successful business transformation, irrespective Wecome…of industry, will depend on the same set of basicunderstandings and capabilities:• Understanding of core business and complements• Containment of existing business operations andprocesses (if existing)• Creation of new business operations and processes(“Agile Framework”)• Rapid execution capability that maximizes the disrup-tive value, cost structure and time to market created bythe exponential technical advances happening (“NewBusiness Factory”)• A resulting real time data driven business operationand business processes “There will be a transformation fromAll businesses will construct a digital business opera- industrial revolution lead behaviorstion that will be the replacement of the traditional ITorganization of today. Predictable performance driven to information lead behaviors”delivery of digital capability shall be a foundationalbuilding block for next generation competitiveness.ITC Stages of Transformation Public Hybrid Private Cloud Cloud Cloud Realize Welcome to the New Efficiencies and New Businesses Networked Society BUILD Digital Logistics Performance PREPARE From chaos of Today Changing the Game Before the Game Changes You 13

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What the NetworkedSociety Means to theNetwork OperatorThe future is changing quickly. New capabilities are engineering their own “Fedex” operation – notrequired to maximize and to ensure competitiveness something a company would ever do.and relevance. Using the insights presented in the firsthalf of this paper; a proposal for core carrier business The second alternative is network operators architectand required capabilities shall be presented. Traditional horizontal capability, to enable the performance ship-high margin services such as voice and messaging are ping of any goods in an open and flexible, but depend-under threat by disruptive players due the enabling ca- able and predictable manner. We believe this is thepabilities described earlier while at the same time there future foundational opportunity for the carrier serviceis a larger growing dependence of all players on the provider market.network operator. Digital shipping does not limit service providers fromThe digital shipping network today is the same as the choosing to also ship their own digital products andshipping industry pre-1954 and before the introduction moving further up the value chain. They will, however,of the shipping container. The network is still man- be able to do that, on the same foundational knowl-aged as a wholesale capacity provider. Every day the edge of guaranteed performance as others, transform-equivalent of 200,000 “loose objects” are loaded into ing their industries.the system in the hope they are delivered as required.The future high performance networked society cannothave foundation on such a system.One of two scenarios will evolve. Those shippinggoods that require guaranteed delivery will engineertheir own operations on top of the wholesale besteffort network. While not impossible, it is extremelyexpensive, complicated and time consuming,especially over wireless. In the physical world thiswould be the equivalent of all industries/companiesNetworked SocietyUnderstanding carrier core business and delivering on the value creationand capture14 Changing the Game Before the Game Changes You

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Definition of Informa-tion and Communica-tion Technology (ICT)What is Information and Communication Technology The expression was first used in 1997 in a report by(ICT)? Dennis Stevenson to the UK government and promoted by the new National Curriculum documents for the UKAs defined by Wikipedia: in 2000.Information and communication technologies, usu-ally abbreviated as ICT, is often used as an extended Ericsson believes the ICT sector is leading a globalsynonym for information technology (IT), but is usually transformation. Billions of connections between peoplea more general term that stresses the role of unified and devices across the world are creating informationcommunications and the integration of telecommunica- societies in which learning and the ability to transacttions (telephone lines and wireless signals), computers, “as close to real time as possible” represents the key tomiddleware as well as necessary software, storage and success.audio-visual systems, which enable users to create,access, store, transmit, and manipulate information.In other words, ICT consists of IT as well as telecom-munication, broadcast media, all types of audio andvideo processing and transmission and network basedcontrol and monitoring functions.ICT OperatorCore BusinessWe introduce the concept of the future service pro- “Openness is not a strategy,vider being known as an “ICT Operator”. This is serviceproviders that will target the ICT markets that are cre- it’s a tactic”ated as a result of the impacts and insights presentedpreviously. The Networked Society will depend on the Platform companies are closed around their coreperformance and delivery of the ICT operators. ICT business and open around their complements.operators will combine all their assets to create seam-less operation from a total end-to-end operation pointof view (combining network plus compute).To follow the economics of complements the core busi-ness of the network operator will remain closed whilethe complements shall be curated/open.The ICT operator shall deliver the best performancedigital logistics for its customers. Core business is “dig-ital logistics customer delivery”. Note core business isnot “running networks”. The network operations shallbe engineered to enable best application delivery tomeet the core business needs as effectively as possible(see next section). Courtesy of Vision Mobile [ref] Changing the Game Before the Game Changes You 15

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ITC Operator Core BusinessThe ICT operator will deliver OTT services, both its own Platforms are simple to understand, yet are rarely ex-and from others. These will use the interoperable ser- ecuted well. A successful platform must do three thingsvices available via API’s from its platforms to maximize wellthe application delivery quality and yield managementof network as much as possible. The ultimate customer • Give something away for free, ideally the freeservice however shall be available to the “on net” offerings are what the competition is charging forcustomer where life time value and relationship can be and considers to be their core business,maximized through investments in both next generation • Have a group of customers that pay directlynetwork and operational capabilities. • Generate payment for partnersThe new core business requires the operators to be- The last point, getting partners paid, is frequently over-come a platform and reclaim their original position as looked or not executed. To use Google’s advertisingthe center of gravity for the overall industry. Because network as a simple examplethey have not made this shift to date they are currentlya commoditized component of platforms that are oper- • Google offers free searchated by OTT players. • Adwords is where people pay them • Adsense is how they get people paid Adsense is part of the full circle offering that really allows the Google advertising network to ramp as a successful platform.16 Changing the Game Before the Game Changes You

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The InterdependentNeeds of the EndUser, Application andICT OperatorAll players, including the end user, have very similar capability the ICT operator should be able to indemnifyneeds from their digital logistics providers: any customer from loss of data, failures in data integ- rity, security breaches, performance guarantees. The• “Make the business model as favorable as possible largest barrier for enterprises to adopt next generation for me” ICT solutions is one of risk management and risk expo-• “Maximize my end user experience” sure. The removal of this barrier will be the number one accelerator for adoption, given the proven cost• “Minimize my cost” benefits.• “Make sure it works the way it is suppose to” 3 Note in reality in the new P2P mesh era of web development, both client and server end points may be have many “API endpointThe end user has this expectation from its application dependencies” that make the routing and correct positioning of compute capability much more complexand application service provider. The application ser-vice provider cannot afford to not deliver on its cus-tomer promise and therefore has the same request tothe ICT operator. By exposing capability from its coreoperations, the ICT operator can enable the applica-tion provider to not only meet the needs of their endcustomers but also maximize the use of the networkassets to increase margin and revenue while positivelyimproving utilization of the underlying network froma yield management perspective.The network exposure layer can be seen as the digitalequivalent of the physical shipping container, whereeach container can be customized to meet the needsof the application’s content inside.The application (client and server) can be seen asthe digital equivalents of the original and destinationend ports in the physical world3.The core business of the ICT operator is high perfor-mance digital logistics. The ultimate business modelis one of indemnification. With the correct operational Changing the Game Before the Game Changes You 17

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Key Capability:Agile Service Delivery– CloudCore operational capabilities require managed expo- The real time operational model requires the ability tosure via API’s to enable the building of the digital ship- be able to operate very flexible agile business supportping container. solutions that enable rapid introduction of new capa- bilities and the self service management of customers.The Interdependent Needs of the End User, Application Different business processes and business modelsand ICT Operator) that will deliver the required perfor- must be easy to introduce and integrated into the othermance. The right capabilities need to be exposed. The operations to enable effective offering of differentiatedcore business needs to be protected. Scale (up and capabilities that can be monetized while maximizingdown) delivery of own API’s (and any inter-operable yield management of the underlying capability set inAPI’s), own network and own compute needs to be parallel.managed. Usage needs to be monitored and used toenable anticipatory pro-action. This is becominglycommonly known as “Network as a Platform”.Control and operations of deployment should be in thehands of the customer. The customer should be able to:• Manage what is deployed where• Observe performance on demand• Change deployment on demand• Be in real time control of cost to performanceKey Capability:Complianceand GuaranteeAs businesses become more dependent on digital as- If there is any debate or question on the above then itset management and delivery it must be guaranteed will slow down adoption. Ultimate business opportunitythat performance and any regulatory compliance is is for an ICT operator to indemnify any client againstsatisfied. risk for the above, if the correct technical and opera- tional support can be placed in execution• Is my data secured?• Is my data the same as when I put it there?• Is my data the same as when I put it there 10 years ago?• Is my data stored in a legally compliant location?• Am I still compliant with any regulatory or business requirement?18 Changing the Game Before the Game Changes You

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Core ICTOperator CapabilitiesThe purpose of this paper is not to cover in detail therequired capabilities to deliver on the core opportu-nity of the ICT operator and digital logistics. The core KEY ICTcapabilities are already covered in whitepapers and OPERATOR CAPABILITIESworkshops that can be provided upon request. Thepurpose of this paper is rather to place them all in the Performance Infrastructurecontext of the changing landscape and resultant busi- Network as a Platformness opportunity. Real Time Introspection Real Time Management Anticipatory Pro-actionKey Capability:Next GenerationOperationsThe networks of today are no longer being constructed be guaranteed in terms of performance to need, theto carry voice and messaging. They are being con- yield of network is as effective as possible and the cus-structed to deliver the digital assets of people, busi- tomer’s cost structure versus required performance isnesses and society. Existing planning, operations and as lucrative as possible. This is the construction of themodels do not work. A transformation of operation is high performance digital delivery operation.required to ensure the business of digital logistics canKey Capability:PerformanceInfrastructureInfra-structure of the future will require to be allocated • Speed of spin up, spin downdynamically depending on performance requirements • Efficiency of virtualization(bandwidth, jitter, latency requirements). Cloud is the • Distribution of compute throughout the networkexisting virtualization of compute infra-structure. Soft-ware Defined Networking is the virtualization of network Operations should be as secure as possible from aninfrastructure. The combined dynamic operation of both architectural perspective as well as an auditor, stand-aspects, dependant on demand and status, will lead ards perspective. Data integrity should be guaranteedto much better return on investment of the underlying – that data will be there and it will not be compromisedcapability. Cloud virtualization should be as efficient as without knowledge – now and ten years from now. Forpossible in terms of: both data security and data integrity, indemnification is• Throughput to footprint the ultimate business model and accelerator.• Vertical scaling Changing the Game Before the Game Changes You 19

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Key Capability:AnticipatoryPro-actionDeployment of applications in the virtualized environ- The successful operation of the real time ICT operatorment is extremely complex. With hundreds of thou- will be driven from the utilization of the operational datasands of virtual servers operating millions of applica- generated both directly and indirectly. This will be usedtions across distributed compute (or data) centers to further optimize performance for the ICT operator,leads to challenges in answering performance issues: also to generate new business offerings of value and also as a value add service to customers who also• Why is my application down? could derive business value from the operational data• Why is my application slow (worse)? contained.• Is it the network?• Is it the storage?• Is it the compute?• Is it the application?The ability to investigate performance in real time iscrucial to managing high performance SLA require-ments. Operational margins and customer satisfactionwill depend on the ability.OverallBusinessTransformationUltimately we are discussing business transformationof the operator of today who delivers voice and mes-saging to the ICT operator of tomorrow who deliversperformance digital logistics. As seen in the physicalworld of performance shipping (for example Fedex),optimization of internal capabilities will also translateinto optimization of customer capabilities that will leadto their differentiation in their own marketplace anddeep ICT operator, customer relationship and depend-ency. Changing the Game Before the Game Changes You 20

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In SummaryThe world is changing faster than ever before. The com- Ericsson believes this is a pre-requisite for the success-bined forces of devices, computing, dematerialization, ful deployment of the next generation of businesses,big data and network will change the landscape of next societies, and us as individuals, where operation can-generation competitiveness. We already see companies not be best effort due to the mission critical nature ofthat are failing to change alongside companies that are what is being delivered.re-inventing their businesses. The clock is ticking forall companies to understand their true core business, Ericsson is in active dialog around the world abouttheir complements and what they need to drive the what is required to successfully transform the servicenext level of business differentiation in the “Networked provider business model as well as the business modelSociety” of tomorrow. Business models will change and of the service provider’s customers.business operations will need to transform. For more information about detailed whitepapers and/Carrier Service Providers are no different from any or interest in workshops to discuss what is contained inother businesses. Core business must be understood this paper, please contactand business operations changed to reflect the needto deliver on the new core business requirements. http://www.ericsson.com/feedbackEricsson believes we are on the brink of a “NetworkedSociety” where real time performance digital logis- An Ericsson representative will contact you back.tics will become the core delivery of the networkingindustry. Technological change Pace of change Gap Perceived technological change Time21 Changing the Game Before the Game Changes You

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Who is Ericsson? Ericsson is a world-leading provider of telecommunica-tions equipment and services to mobile and fixed net-work operators. Over 1,000 networks in more than 180countries use our network equipment, and more than Our vision is to be the prime driver40 percent of the world’s mobile traffic passes through in an all-communicating world.Ericsson networks.We are one of the few companies worldwide that canoffer end-to-end solutions for all major mobile com-munication standards. Our networks, telecom servicesand multimedia solutions make it easier for people,across the world, to communicate.And as communication changes the way we live and In recognition of the scale of change currently under-work, Ericsson is playing a key role in this evolution. way Ericsson has instituted a global evangelist programUsing innovation to empower people, business and so- consisting of seven thought leaders distributed aroundciety, we are working towards the Networked Society, the world. Follow and message Geoff Hollingworth, thein which everything that can benefit from a connection evangelist responsible for this perspective atwill have one. Our vision is to be the prime driver in an @geoffworth.all-communicating world.Who is Joyent?Joyent is a global cloud computing and systems soft- Joyent is also the key contributor to and sponsor ofware provider that offers an integrated technology suite Joyent SmartOS, an open source project dedicated todesigned for enterprises and developers. JoyentCloud. the complete, modern operating system. SmartData-com delivers public cloud services to some of the most Center orchestrates Joyent’s technologies into a cohe-innovative companies in the world, including LinkedIn, sive, reliable and distributed system that can stand upGilt Groupe and Kabam. to the compute demands of the modern world.Node.js, the open source server-side JavaScript project A global ecosystem of leading technology partnersowned and stewarded by Joyent, provides develop- assists Joyent in enabling customers to leverageers and enterprises such as Microsoft with the most the performance, scalability, reliability and securitypowerful runtime for developing dataintensive, real-time inherent in the company’s cloud solutions.apps.